Saturday, January 30, 2010

Have Presidential Economic Advisers And The CEA Outlived Their Usefulness?

In 1946, after WWII, with fresh memories of the Great Depression, faith in Keynesian economics and a belief in successful government intervention in the economy, Congress passed the Employment Act of 1946 and established the Council of Economic Advisers (CEA) to advise the President.

The Council of Economic Advisers assists the President with the development and implementation of our nation’s economic policy. Led by a Chair and two members, the Council consists of a team of highly-trained professional economists, forecasters and statistical experts who draw upon evidence-based research to provide the President with thorough and timely economic analysis. Christina Romer was appointed by President Obama and confirmed by the Senate to serve as Chair of the Council. Austan Goolsbee and Cecilia Rouse have been confirmed to serve as the Council’s two members.

In 1978, Congress passed the Humphrey-Hawkins law. It required the President to seek the inconsistent economic goals of full employment without inflation. The CEA's annual economic report on the economy, employment and jobs became a political document as it presented the President's goals for employment and economic growth in a favorable future scenario in accordance with electoral party economic platforms.

These days the political parties have opposing opinions of the effects of government intervention and taxes on economic growth and employment based on their different ideologies. The CEA's report and advice to the President is often just a restatement of his/hers party's prior philosophical and economic beliefs of the power of government intervention and the economic effects of taxes, supplemented with charts, graphs and numerical projections.

Past CEA chairs have said in substance that when they were advising the President, an economic policy's ability to get public acceptance and Congressional votes for passage was the paramount practicality and it overrode economic theory and research results.

Since Presidential political parties' economic policies reflect their ideologies, there is very little need to advise a President regularly on economics. Additionally, Congress can and often does hold hearings for new legislation where experts testify. The best minds and experts in economics can present their views and research in person or in writing at those times. Similarly, as the President does on other matters, there is nothing to stop him from hearing the views of economists and other economic advisers, which is what Presidents did before the CEA.

Other than producing documents and charts for other economists to accept, reject, criticize or defend, there is little purpose these days for the CEA. Regulatory issues, such as restructuring the financial system fall under the Treasury Secretary and not the CEA.

There is little reason these days to package ideologies in an economic paper of charts and numbers signed and presented by CEA members. It is time to stop the political charade and just abolish the CEA.